Baidu Connect Initiative Furthers Offline To Online Plan

Baidu Inc (ADR) (NASDAQ:BIDU) held its Baidu World Technology Innovation Conference this week in Beijing. One of the big announcements was the revelation of its Baidu Connect strategy. The Chinese company also showed off a number of smart devices like the Baidu Kuaisou, a smart chopstick, and the BaiduEye.

Unveiling Baidu Connect

The Baidu Connect initiative is a product to enable merchants to create their own public mobile enterprise accounts. Stifel analysts equate it to Weibo and WeChat enterprise accounts. Baidu reported that mobile searches for services rose 133% year over year in July.

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The company also reported having more than 400 million daily active users on its Baidu Mobile app. Baidu said most of the requests for services were related to traditional merchants. So in order to monetize that mobile traffic while also enabling service providers to increase their conversion rates, the company created the Baidu Connect offering.

The company offers information templates as well as payments, reservations and some functions for social and communication. According to Stifel analysts, the company is essentially trying to direct its mobile search traffic to merchants through its search results, Baidu Maps, merchant accounts and a recommendation function that’s in the Baidu Mobile 6.0 version.

Comparing Baidu Connect to Light App

In their report dated Sept. 4, 2014, analysts George Askew and Zim Yin said they think Baidu Connect is like the Light App strategy only “lighter.” They say the new strategy is more convenient, however, “without running into the technology difficulty of setting up apps.”

They add that the strategy is a key part of the company’s offline to online strategy and should help merchants move their services to mobile while exposing them to a broader audience and increasing their conversion rates.

The Stifel analysts believe that in the meantime, Baidu is able to speed up the monetization of mobile traffic, thus raising the mobile take-rate, which currently lags behind that of PCs. They expect the number of Baidu Connect accounts to reach “meaningful scale” in the first half of next year. They expect the company to invest heavily in marketing and sales in order to promote it.  In the future though, they think merchants will start bidding on mobile keywords and placing “sponsored Baidu Connect names” on mobile search results.

The Stifel team reiterated their Buy rating and price target of $250 per share on Baidu.